The U.S. District Court for the Southern District of Texas has issued an opinion in ongoing litigation by Aetna and Humana, both Medicare Advantage Plans (MAPs), against a Plaintiff law firm that represented asbestos trusts. The allegation by Aetna and Humana (“Plaintiffs”) is that Defendant Shrader Associates LLP (“Schrader”) represented at least fifteen “Matched claimants” that received coverage from the Plaintiffs ERISA or Medicare Advantage Plans, the Plaintiffs paid to treat the matched claimants’ asbestos-related medical conditions. Plaintiffs plead several causes of action within their complaint, however for the purposes of this blog we will only discuss the court’s deciphering of the Plaintiffs Medicare Secondary Payer (MSP) private cause of action here.
Regarding the MSP private cause of action, Schrader argued that the asbestos trusts were not “primary plans” as defined under the MSP, Plaintiffs failed to allege facts capable of establishing that a “primary plan” failed to make a payment required by the MSP, and construing the MSP to afford Plaintiffs a private right of action would render MAPs secondary payer rights “superfluous.” The Court disagreed, finding that the term “self-insured plan” should be afforded a relatively broad definition, and that asbestos trusts constitute primary plans under the MSP. Further, the court disagreed that affording MAPs a private cause of action would be superfluous. Although the Fifth Circuit has not yet determined when a MAP may avail itself of the MSP private cause of action, both the Third and Eleventh Circuits had previously held that the MSP permits a MAP to sue a primary plan that fails to reimburse a MAP’s primary payment. Further, after the Third and Eleventh Circuit decisions were issued, district courts around the country, including in the Fifth Circuit, have reached the same conclusion.
Commentary: It is interesting that the Court upheld this MSP private cause of action against attorneys as Defendants, which is in direct contradiction to our recent blog on a similar matter from a District Court in Connecticut which found that the MSP private cause of action was intended to be utilized against primary plans, only and not against attorneys representing the Medicare beneficiaries. For our prior blog on the Connecticut District Court case, click here. Further, it surprised us that the District Court maintained subject matter jurisdiction over a bankruptcy matter- clearly MSP and ensuring the integrity of the Medicare Trust Fund is an important enough of an issue for the court to entertain.
However, where we are seeing the consistency in the case law is that nearly all District Courts are aligning themselves in finding the Third and Eleventh Circuit decisions as persuasive, and that MAPs may maintain an MSP private cause of action for double damages against primary plans that fail to reimburse the MAP. As MAPs continue to become more aggressive in litigation and conditional payment recoveries, and courts nationwide continue to find that MAPs are afforded a private cause of action for double damages, we recommend diligence in verifying MAP enrollment information prior to settling a liability, workers’ compensation, or no-fault claim with a Medicare beneficiary. Contact us at email@example.com to learn more about our Best Practices.